Global passengers will double in the next 20 years, reaching 7.8 billion in the year 2036, according to predictions by the International Air Transport Association (IATA).
Airlines will need to offer more flights and utilize larger aircraft, and airports will need to improve and expand infrastructure to accommodate more travelers. To cope with these demands, the entire industry must implement the strategies and innovation needed to accommodate growth, while remaining competitive, compliant, safe and secure.
Here are some of the challenges aviation professionals and organizations will face in both improving current operations and preparing for future demands.
World Economy
Regional and global economies can have a significant impact on growth and financial performance. As international airlines decide what regions to add or routes to expand, it’s vital to be aware of current market conditions due to economic volatility or recovery.
For example, the International Air Transport Association (IATA) predicts all regions, including North America, will improve profitability in 2018; however, market conditions vary. In Europe, for example, the IATA predicts European airlines will earn a net profit of $11.5 billion, up from 9.8 billion in 2017, with the driving factors as follows:
- A strong economic recovery in home markets
- Rebound from the terrorism events of 2016
- Consolidation from failed regional airlines
Other regions may have different economic factors for growth, such as Mexico – which is slated to benefit from a weaker U.S. dollar and moderate recovery in the Brazilian economy. Regional airlines and airports should consider these domestic and international factors when considering growth.
Cost Controls
Companies need to practice effective cost control to maintain operations and meet consumer demand, while making the appropriate investments for future projections. In aviation, that means controlling operating costs and making changes that accommodate outside factors.
Minor changes – such as an increase or decrease in fuel prices – can have a major impact on total operating costs. An increase in fuel prices would require airlines to find revenue in other areas.
The International Civil Aviation Organization (ICAO) provides a guide regarding total operations costs of major U.S. airlines.
- 44% – aircraft operating expenses, including fuel, direct maintenance, depreciation and crew
- 29% – servicing expenses, including aircraft, traffic and passenger services
- 14% – reservations and sales
- 13% – overhead, including advertising and publicity and general and administrative
According to PwC, airlines should leverage technology for optimization, such as predicting and preventing equipment failures and improving productivity.
Customer Experience
Travelers want it all, including a seamless transition from land to air and everything in between. They want less stress going through security and easier options for dropping off luggage. Airports, airlines and other important partners, including travel retailers, need to work together to enhance the travel experience.
Only half (56%) of North American passengers in 2017 were satisfied with their last travel experience, according to the IATA’s 2017 Global Passenger Survey. Which means all areas of the travel spectrum have room for improvement.
The study reports that passengers were most satisfied with on-board service and boarding, but expressed higher levels of dissatisfaction with border control, in-flight entertainment and bag collection. To remain competitive, especially in markets where low-cost carriers are increasing in presence, major airlines and airports need to cater to customers.
Cybersecurity
Cybersecurity is a growing threat among all industries. However, in aviation, a cyber attack can do more than expose passenger data. Damage could be widespread and deadly – a hacker could potentially shut down runway lighting, baggage control systems and communication between air traffic control and pilots, as Bill Brennan, Senior Director for Global Information Security with Leidos explains in his blog. Virtually, all network systems are at risk, including reservation systems, flight management systems and flight traffic management. Airport and airline leadership will have to work with technical support to implement cybersecurity protection and create a culture of security.
Airline Growth
Airlines are up against multiple challenges regarding growth. They need to both maintain current fleets and purchase new aircraft to replace older planes and accommodate an increase in travelers.
Fleet replacement should be strategic, with goals to reduce fuel and maintenance bills to help control costs. According to the Centre of Aviation (CAPA), the three large U.S. airlines are already working on re-fleeting projects, but they are all taking different approaches:
- American– adding new aircraft to replace aging jets
- United– focusing on purchasing used narrowbody jets
- Delta – adding used, current narrowbody generation models
In December 2017, Delta confirmed an order for 100 Airbus A321neo narrow-body jets, in an effort to revitalize the company’s fleet, according to CNBC. The order, which is valued at $12.7 billion, will begin with first deliveries in 2020.
Airport Growth
Airports are being tasked with upgrading terminals, operations centers, concourses and more to better accommodate an increase in travelers as well as enhance on-site amenities, including airport hotels, shopping centers and even an indoor rainforest. That’s right, a multi-billion dollar project at Singapore’s Changi Airport features a mixed-use facility, called the Jewel. The Jewel, which is set to open in 2019, according to Business Insider, features an indoor waterfall, 130 hotel rooms and more than 300 shops and restaurants.
While the Changi Airport’s upgrades may seem extravagant, modern and luxurious upgrades are being completed at airports around the world. Airport infrastructure will need to keep up to compete.
